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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A good for which higher income increases demand






2. The output where ATC is minimized and economic profit is zero






3. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






4. Entry (or exit) of firms does not shift the cost curves of firms in the industry






5. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






6. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






7. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






8. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






9. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






10. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






11. Exists if a producer can produce more of a good than all other producers






12. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






13. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






14. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






15. The difference between total revenue and total explicit and implicit costs






16. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






17. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






18. Exists if a producer can produce a good at lower opportunity cost than all other producers






19. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






20. Entry of new firms shifts the cost curves for all firms upward






21. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






22. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






23. All firms maximize profit by producing where MR = MC






24. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






25. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






26. ATC = TC/Q = AFC + AVC






27. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






28. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






29. 0 < Ei < 1






30. Two goods are consumer substitutes if they provide essentially the same utility to consumers






31. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






32. Ei = (%dQd good X)/(%d Income)






33. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






34. The difference between total revenue and total explicit costs






35. The marginal utility from consumption of more and more of that item falls over time






36. Product demand - productivity - prices of other resources - and complementary resources






37. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






38. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






39. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






40. The total quantity - or total output of a good produced at each quantity of labor employed






41. Ed = 0 - no response to price change






42. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






43. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






44. Es = (%dQs) / (%dPrice)






45. The mechanism for combining production resources - with existing technology - into finished goods and services






46. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






47. The change in quantity demanded resulting from a change in the price of one good relative to other goods






48. AVC = TVC/Q






49. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






50. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary